The installed cost of solar photovoltaic (PV) power systems in the U.S. plunged 17% in 2010 compared to the year before, and by an additional 11% within the first six months of 2011, a new report from the Department of Energy’s Lawrence Berkeley National Laboratory shows.

The report, “Tracking the Sun IV,” suggests that for utility-sector PV, costs varied over a wide range for systems installed in 2010. The cost of systems greater than 5,000 kW ranged from $2.90/W to $6.20/W, reflecting differences in project size and system configuration, as well as the unique characteristics of certain individual projects. Consistent with continued cost reductions, current benchmarks for the installed cost of a typical, large utility-scale PV project generally ranges from $3.80/W to $4.40/W.

The report, a historical summary of installed PV costs in the U.S. from 1998 to 2010, attributes the installed cost reductions to the dramatic cost decreases in PV module prices. “Wholesale PV module prices have fallen precipitously since about 2008, and those upstream cost reductions have made their way through to consumers,” explains report co-author Galen Barbose, who is also a part of Berkeley Lab’s Environmental Energy Technologies Division.

The report indicates that non-module costs—such as installation labor, marketing, overhead, inverters, and the balance of systems—also fell for residential and commercial PV systems in 2010, declining by roughly 18% compared to 2009.

“The drop in non-module costs is especially important as those are the costs that can be most readily influenced by solar policies aimed at accelerating deployment and removing market barriers, as opposed to research and development programs that are also aimed at reducing module costs,” notes report co-author and Berkeley Lab scientist Ryan Wiser.”

The study is the fourth in Berkeley Lab’s “Tracking the Sun” report series. The report’s authors examined more than 115,000 residential, commercial, and utility-sector PV systems installed between 1998 and 2010 across 42 states, representing roughly 78% of all grid-connected PV capacity installed in the U.S. The lab conducted the study to “to provide policy makers and industry observers with a reliable and detailed set of historical benchmarks for tracking and understanding past trends in the installed cost of PV.”

Costs Differ by Region

The study also highlights differences in installed costs by region and by system size and installation type. Comparing across U.S. states, for example, the average cost of PV systems installed in 2010 and less than 10 kW in size ranged from $6.30/W to $8.40/W depending on the state. The report also found that residential PV systems installed on new homes had significantly lower average installed costs than those installed as retrofits to existing homes.

Based on these data and on installed cost data from the sizable German and Japanese PV markets, the authors suggest that PV costs may be driven lower through large-scale deployment programs, but that other factors are also important in achieving cost reductions.

The report also shows that PV installed costs exhibit significant economies of scale. Among systems installed in 2010, those smaller than 2 kW averaged $9.80/W, while large commercial systems >1,000 kW averaged $5.20/W; partial-year data for 2011 suggests that average costs declined even further in 2011. Large utility-sector systems installed in 2010 registered even lower costs, with a number of systems in the $3.00/W to $4.00/W range.

Cost Declines in 2010 Were Offset by Falling Incentives

The average size of direct cash incentives provided through state and utility PV incentive programs has declined steadily since their peak in 2002, the study shows. The dollar-per-watt benefit of the federal investment tax credit (ITC) and Treasury grant in lieu of the ITC, which are based on a percentage of installed cost, also fell in 2010 as a result of the drop in average installed costs.

The reduced value of federal, state, and utility incentives in 2010 partially offset the decline in installed costs. “Therefore, while pre-incentive installed costs fell by $1.00/W and $1.50/W for residential and commercial PV in 2010, respectively, the decline in ‘net’(or post-incentive) installed costs fell by $0.40/W for residential PV and by $0.80/W for commercial PV,” the lab said.

Sources: POWERnews, Lawrence Berkeley National Laboratory